Benjamin Kabak

These days, the MTA’s federal stimulus grants have become hot topics of conversation. Some would prefer to use the legally permissible 10 percent siphoned from the stimulus grant to help cover the ever-widening operating deficit. Others don’t feel comfortable taking money away from the also financially distressed capital budget. But what if the money isn’t being spent?

According to a report issued recently by the New York Building Congress, few of the city’s $1.57 billion in transportation stimulus funds have spent. In fact, the city itself has spent only $857,000 of that money, and while the MTA has spent more of its allotted dollars, spending is far off pace. Of the MTA, the NYBC said:

According to the State Comptroller’s figures, the MTA has spent $39,000 of stimulus funds on a bridge replacement on South First Avenue over the MetroNorth Railroad. Approximately $10.9 million is earmarked for this project.

At the end of 2009, no federal stimulus money had been spent on the two MTA projects slated to receive the most ARRA funds; the Fulton Street Transit Center, which is expected to receive $423 million, and the Second Avenue Subway, which has been approved for $276 million.

According to MTA, the agency has been allocated a total of $1.075 billion in ARRA funds and has awarded contracts worth $886 million. However, the MTA acknowledges that just $14 million has been spent to date.

This data underscores a point I’ve made about the stimulus grants in the first place. Generally, shovel-ready projects were mostly funded, and the MTA — along with many other state organizations — used its stimulus dollars to cover project deficits. NYBC’s head echoed this sentiment.

“As New York City nears the first anniversary of federal stimulus legislation, we remain greatly concerned about the slow pace of capital spending on transportation projects,” NYBC President Richard T. Anderson said. “Virtually all of the stimulus money spent and received to date has been devoted to programs designed to lessen the impact of the economic downturn on individuals, bolster the operating budgets of local governments, or fund small-scale construction projects. While such spending is important, it does little to stimulate the broader economy, create new jobs and prepare the region for renewed growth.”

So what is to be done? If anything, this latest development strengthens the case for the Russianoff Plan. Congress passed the stimulus money in order to stimulate the economy, and an operating budget crisis at the MTA will lead to job losses that we as a city would prefer to avoid. If those federal dollars can be used to avert some cuts and some staff reductions, then, the money would be going to good use. Of course, some of the payroll fat at the MTA deserves to be cut, and some of the efficiency-based service changes should be implemented anyway. As of now, though, this money is just sitting there.

I’m still not on board with the Russianoff Plan, but I can see where this debate is leading. Eventually, the MTA, faced with a huge debt and a pile of unused cash just sitting there, will take some of the stimulus funds from projects that, in a few years, will need more money. The economics of it all just keep getting more and more muddled as time goes on.

Those in charge of the MTA must be really glad Wedneday is over for it was yet another bad time in the long run of bad days for the MTA finances. As we learned late in the afternoon, revised budget projections from the state have opened up a wider gap in the MTA’s budget. Only later in the day did the extent of the cuts come into view.

Basically, the MTA has been fleeced by the state. Promised enough money to avoid either financial ruin or extreme service cuts and/or fare hikes in 2010, the MTA has not been given the millions promised to it. Rather, the State Division of Budget continues to adjust forecasted revenues from the Regional Mobility Tax downward. A statement from the agency yesterday summed up the bad news:

“The MTA anticipates that it may need to reduce the estimated receipts included in its 2010 budget by approximately $350 million (which includes $179 million of 2009 collections whose receipt was previously reforecast for 2010), with revenue loss of up to an additional $200 million a year thereafter. Combined with additional revenue loss previously projected in the Governor’s Executive Budget, the MTA could be faced with up to a $400 million new deficit for 2010.”

And so when we add the new deficit to the old $383 million deficit, we find the MTA looking at a 2010 fiscal hole of $783 million — or nearly eight billion dimes. Got a few to spare?

For its part, the MTA is “closely following” the state’s budget machinations and “remains prepared to take needed actions in order to maintain a balanced budget.” That’s agency-speak for “we’re screwed,” but the MTA, as I see it, has a few avenues it could pursue in order to gain more funding. Many of these approaches are politically unpalatable while others are generally unfeasible or simply not enough. Still, it’s worth an examination of the five proposals that should be on the table.

1. Adopt the Russianoff Plan
As much as I do not yet support moving stimulus funds from the capital budget to the operating budget, this move is clearly the most obvious one to close a budget gap of this magnitude. The only problem is that it falls woefully short of achieving that goal. Even if the MTA moves the $121 million allowed by law over from the stimulus ledger to the operating balance sheet and even if the MTA takes the $50 million PAYGO reserve and reinstates that into the operating budge, the agency would still be $612 million in the red. Plus, the strained capital budget — a necessary part of any future transit system that we will enjoy when the agency’s finances are stronger — would be further drained.

2. More service cuts
Right now, the MTA has a full slate of money-saving service cuts on the table. Although many of these cuts can be viewed as service reorganizations that better meet demand and costs, the MTA is still cutting train frequency and increasing load guidelines. These costs will save some money, but by themselves, the cuts can’t cover the deficit. If the MTA opts only to cut services, the cuts would be dramatic — think no overnight train service — and would cripple New York City. Still, if Albany doesn’t have or can’t find the money, this is truly a Doomsday option that remains on the table.

3. Raise fares
On Tuesday, I analyzed the debate between fare hikes and service cuts as budget-balancing approaches. In the end, 77 percent of those who voted in the poll supported fare hikes as a way to close the budget gap. For the MTA to cover this new gap, the agency would have to institute the already-planned service cuts and a fare hike that nets another $400 million revenue. To do so by fares would lead to a fare hike of around 10 percent across the board. Despite the MTA’s desires to avoid a hike, it seems almost inevitable.

4. Congestion Fee/East River Bridge Tolls
While one of these proposals could be passed without the other, I lump them into one item because they are, in effect, the same thing. Charging drivers who exact a cost on the city when they use unnecessarily free bridges would result in a guaranteed source of revenue for the MTA. Charging drivers who exact a cost on the city when they contribute to congestion and pollution would result in more funding for the MTA. The real problem here is that no New York politician seems willing to take the bull by the horns even though the majority of New Yorkers have, at times, voice support for either or both of these proposals. They too seem inevitable but not quite as soon as a fare hike does.

5. Market-Rate On-Street Parking
Last July, I ran some numbers and explored why New York should be charging its residents hundreds of dollars for the privilege of on-street parking. As real estate rates remain among the highest in the nation, the city gives away valuable space to cars for free. If the city instituted a residential parking permit program with tiered fees based upon proximity to transit and guaranteed those revenues to the MTA, the transit authority would be able to close a significant portion of its budget gap. Again, though, this proposal is politically unlikely.

So in the end, we’re left with the same options under consideration for the better part of the last two years. Even though more equitable funding solutions exist, when the dust settles, my money is on a combination of fare hikes and service cuts. The auto drivers — a small percentage of New York City’s commuters — will enjoy their free rides as the MTA limps toward financial ruin.